Russian authorities refused to ease their tough stance on Friday in a dispute with Ukraine over gas prices, threatening again to shut down gas supply to the neighbor on New Year's Day and criticizing Kiev's call for more time to reach a deal.

The Ukrainian presidential press service said President Viktor Yushchenko had sent a telegram to his Russian counterpart, Vladimir Putin, proposing to freeze gas prices for 10 days to allow Russia's Gazprom and Ukrainian national oil and gas company Naftogaz Ukrayiny to work out a contract for gas supply for 2006.

The Kremlin, however, denied receiving the telegram from Yushchenko.

Meanwhile, the state-controlled gas monopoly Gazprom rejected the reported proposal.

"There exists a danger that, having proposed a freeze on the price for 10 days, the Ukrainian side will want another 10 days," Gazprom spokesman Sergei Kupriyanov was quoted by the Interfax news agency as saying.

Kupriyanov said company chairman Alexei Miller reiterated Gazprom's position on Friday and it remained unchanged.

Russia exports 112 billion cubic meters of natural gas to Europe through Ukrainian pipelines each year.

Currently, Ukraine is buying Russian gas for US$50 per 1,000 cubic meters, and Russia has to provide 17 billion cubic meters of gas for its neighbor as "territory transit fees."

Gazprom has asked Ukraine to pay more than quadruple this price and offered cash payments for the transit of its gas to European clients.

Ukraine said it is willing to switch to market prices for gas but insisted on a transitional period to adjust its economy.

The politically-charged gas dispute reveals that relations between the two countries have been further chilled since Yushchenko took office in January of this year, analysts said.

Ukrainian-Russian ties were in tension after Viktor Yanukovitch, a Moscow-backed candidate, lost the presidential election late last year.

Since Yushchenko took office, Ukraine and Russia had made efforts to improve their relations. He visited Russia in January and Putin also paid a reciprocal visit to Ukraine in March.

But high-level exchanges were plunged into stagnation after the visits.

Former Ukrainian Prime Minister Yulia Tymoshenko never visited Russia during her seven-month tenure, and for the Russian side, Putin cancelled a visit to Ukraine originally scheduled for October.

In late August, the two presidents failed to reach consensus on the improvement of relations between their countries during a Commonwealth of Independent States (CIS) summit in the Russian city of Kazan.

On Dec. 6, when meeting with Ukraine's parliament Speaker Volodymyr Lytvyn in Moscow, Putin said the two countries "had lost many opportunities" to improve relations in the past 12 months.

Relations between Russia and Ukraine were also affected by Kiev's eagerness to join the North Atlantic Organization (NATO), which aroused concerns in Moscow, analysts said.

In October, Ukraine held an informal meeting with NATO in the Lithuanian capital of Vilnius and announced that it will try to join the alliance by the end of 2008.

Russian Defense Minister Sergei Ivanov said that if Ukraine joins NATO, his country will suspend all cooperation with it in the field of the war industry.

Also, Moscow was dissatisfied with Ukraine's criticism of the Russia-led CIS. In early December, Ukraine and Georgia, along with some other countries, set up the Commonwealth of Democratic Selections, which Moscow said was aimed at putting an end to the CIS.

On Thursday, Yushchenko rejected Russia's offer of a multi-billion-dollar loan to help his country adjust to the four-fold increase in gas prices.

"Ukraine does not need these credits. Ukraine will rely on its own resources under a clear, correctly and objectively formed price," said Yushchenko in a televised speech delivered after a second day of talks between the two countries.

He also called the price rise "a provocation."

Earlier in the day, Yushchenko decreed that gas and electricity prices for all consumers would rise to "an economically founded level" and called on authorities to find ways to cut energy consumption.
 
Ukrainian Prime Minister Yury Ekhanurov told Ukraine's Era FM radio on Friday that his country will receive 40 billion cubic meters of natural gas from Turkmenistan in 2006 as an agreement has already been signed.

Analysts said the gas dispute will not be solved in a short period of time and the prices will be raised eventually, but the margins of increase will depend on the political considerations of the two countries' leaders rather than market factors.

(Xinhua News Agency December 31, 2005)